Insurance: Opting For Self-Purchase Or Employer-Provided

Most people obtain their insurance through their employer, which is also referred to as group insurance or employer-sponsored insurance. In 2020, employers provided coverage to about half of all Americans, and more than half of all insurance coverage is employer-provided.

However, a small portion of people in the US buy their own insurance. According to a 2017 survey, only around 7% of people buy individual health insurance.

Through their employer

In the United States, a majority of people under the age of 65 obtain health insurance through their employer, either from their own job or through a family member such as a spouse or parent. In 2022, approximately 78% of the population was eligible for health insurance through their employers.

The significance of employer-sponsored health insurance is that it provides financial protection and access to healthcare services, helping employees maintain their health and well-being. For employees, this coverage reduces the financial burden of medical expenses, offering peace of mind and ensuring they can seek necessary medical care without incurring exorbitant costs.

There are several types of health insurance plans that employers may offer their employees. The most common type is the Preferred Provider Organization (PPO) plan, offered by 47% of firms in 2023. High Deductible Health Plans with Savings Options (HDHP/SO) are also popular, with 29% of firms offering them. Less common are Health Maintenance Organization (HMO) plans, offered by 13% of firms, and Point-of-Service (POS) plans, offered by 10% of firms.

The cost of employer-sponsored health insurance is shared between the employer and the employee. In 2023, the average annual premium for single coverage was $8,435, with employees contributing about 17% of this amount. For family coverage, the average premium was $23,968, with employees paying around 29%.

It's important to note that not all employers offer health insurance to their employees. Lower-income households are less likely to have employer-based coverage; only 13% of those earning less than $25,000 annually have employer-provided health insurance, compared to 82% of those earning over $150,000.

Private insurance

There are several types of private insurance policies that individuals may consider based on their specific needs. Health insurance, for instance, safeguards individuals from the high costs of medical care in the event of a serious accident or illness. It can be obtained through employers, the federal health insurance marketplace, or directly from private insurance companies. In 2021, the Centers for Disease Control reported that about 9.2% of Americans were uninsured, with more than 60% obtaining coverage through their employer or the private insurance marketplace.

Another form of private insurance is long-term disability insurance, which provides financial support in the event of an unexpected loss of income due to disability. According to the Social Security Administration, one in four workers will become disabled before reaching retirement age. While some employers offer long-term disability insurance as part of their benefits package, individuals can also purchase it directly from insurance providers.

Auto insurance is another essential type of private insurance that protects individuals from the financial burden of expensive accidents. Almost all states in the US require drivers to have auto insurance, and there are various types of coverage available, including liability coverage, comprehensive and collision coverage, uninsured/underinsured motorist coverage, personal injury protection, and medical payment coverage.

Life insurance is a final type of private insurance that is recommended by financial experts. It provides financial support for an individual's survivors in the event of their death. There are two main types of life insurance: whole life insurance, which has a death benefit and a cash value component, and term life insurance, which covers a set period, such as 10, 20, or 30 years.

When choosing private insurance, it is important to consider factors such as age, lifestyle, and employment benefits. Additionally, individuals should compare rates, coverage options, and discounts offered by different providers to find the best plan for their needs.

Government-subsidized programs

Government-subsidized insurance programs are a crucial aspect of ensuring that individuals and families have access to affordable health coverage. These programs are particularly beneficial for those who might otherwise struggle to obtain insurance through private providers or employer-sponsored plans. Here is an overview of how government-subsidized insurance programs work and who they cater to:

Affordable Care Act (ACA) and Health Insurance Marketplace

The Affordable Care Act, also known as "Obamacare," established health insurance marketplaces, where individuals can shop for insurance plans that meet their needs. These marketplaces offer plans in four categories: Bronze, Silver, Gold, and Platinum. The category chosen determines the percentage of costs covered by the plan. The ACA also introduced health insurance subsidies to reduce the financial burden of monthly premiums and out-of-pocket expenses. Two types of subsidies are available: Advanced Premium Tax Credits (APTC) and Cost-Sharing Reductions (CSRs). Eligibility for these subsidies is based on income, household size, and the cost of health coverage in a given state.

Medicare

Medicare is a federally run program that primarily serves individuals aged 65 and older. It is one of the largest federal subsidy programs, with projections showing subsidies totalling $11.7 trillion between 2024 and 2033. Medicare provides near-universal coverage for seniors, with only a small percentage of people over 65 lacking insurance.

Medicaid

Medicaid is a joint federal-state program that offers health coverage for low-income individuals and families. To qualify, income must fall below a certain threshold, which varies by state. The Affordable Care Act (ACA) expanded eligibility for Medicaid, leading to increased enrollment. In 2022, about 93 million people were enrolled in Medicaid, providing a vital safety net for those facing economic challenges.

Children's Health Insurance Program (CHIP)

The Children's Health Insurance Program (CHIP) is another government-subsidized program that focuses on providing health coverage for children. It ensures that children from low-income families have access to essential healthcare services. CHIP is often mentioned alongside Medicaid as they share similar goals and are both funded by the federal government.

Other Programs

In addition to the programs mentioned above, the federal government also provides insurance subsidies through veterans' benefits programs. These programs cater to the specific healthcare needs of military veterans, recognizing their unique circumstances and challenges.

Federal Affordable Care Act

The Affordable Care Act (ACA) is a comprehensive health care reform law passed in 2010 with the primary goal of making affordable health insurance available to more people in the United States. The ACA is made up of two parts: the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act.

The ACA has several major aims. Firstly, to achieve near-universal health insurance coverage through shared responsibility among government, individuals, and employers. Secondly, to improve the fairness, quality, and affordability of health insurance coverage. Thirdly, to improve health-care value, quality, and efficiency while reducing wasteful spending and making the health-care system more accountable to a diverse patient population. Fourthly, to strengthen primary health-care access while bringing about longer-term changes in the availability of primary and preventive health care. And finally, to make strategic investments in the public's health, through both an expansion of clinical preventive care and community investments.

The ACA makes health insurance coverage a legal expectation for US citizens and those who are legally present in the country. It does this by strengthening existing forms of health insurance coverage and building a new, affordable health insurance market for individuals and families who do not have affordable employer coverage or another form of "minimum essential coverage" such as Medicare or Medicaid. The Act also restructures Medicaid to cover all citizens and legal US residents with family incomes less than 133% of the federal poverty level.

The ACA sets federal standards for health insurers, with requirements including a ban on rescissions, a ban on excluding children under 19 with pre-existing conditions, coverage of young adults up to 26 under their parents' plans, coverage of clinical preventive benefits, expanded appeals rights when claims are denied, a ban on lifetime limits, and restrictions on annual coverage limits. These standards are designed to set a federal minimum, with state insurance departments implementing and enforcing these laws as part of their legal insurance oversight powers.

The ACA also creates state health insurance exchanges, which are markets for insurance products that qualify for federal tax subsidies and that meet federal and state standards. These exchanges are meant to simplify and ease health insurance purchasing by creating a one-stop-shop for individuals and businesses. Qualified health benefit plans sold on these exchanges must meet a series of federal requirements, including coverage of "essential benefits" and provider network sufficiency.

Private insurance marketplace

The private insurance marketplace is one of the ways that people in the US can obtain insurance. In 2021, more than 60% of Americans obtained their insurance coverage through an employer or in the private insurance marketplace.

The private insurance marketplace is also known as the federal health insurance marketplace. It is one of the options for people looking to obtain health insurance. Other options include obtaining health insurance through your employer, or through government-subsidized programs such as Medicare, Medicaid, and veterans' benefits programs.

If you are looking to obtain insurance through the private insurance marketplace, you can do so by contacting health insurance companies directly or by going through a health insurance agent. Agents work for a single health insurance company, while brokers sell plans from several. Both can help you compare plans and enroll, and they are generally paid by the insurance company whose plans they sell, so you don't pay more by using an agent or broker.

There are also online health insurance sellers, which offer health plans from a number of insurance companies. They allow you to compare prices and features and then enroll with the insurance company. However, they may not offer all plans available in your area.

When it comes to choosing a health insurance plan, there are several options. Bronze health insurance plans, for example, feature low monthly payments but a higher deductible. Silver plans have average monthly payments and a lower deductible than Bronze plans. Gold plans have higher monthly payments but a lower deductible than Silver plans.

The cost of health insurance can be a significant expense for families. In 2022, the average annual premium cost to an employee in an employer-sponsored healthcare program was $22,463 for a family plan. However, employer-provided insurance is usually the best and least expensive option for salaried employees.

For those who cannot afford insurance, there are other options. If your income is low, you may be one of the 80 million Americans who are eligible for Medicaid. If your income is moderate, you may be eligible for subsidized coverage under the federal Affordable Care Act.

Frequently asked questions